Essays on Publicly Traded Family Firms in the United States

Family firms are an important part of the U.S. economy. Using a comprehensive sample of publicly traded family firms in the U.S. this dissertation looks into various aspects of their corporate structure. Specifically, this dissertation studies the industry distribution, capital structure choices, and performance and survival after Sarbanes-Oxley Act of 2002 of family firms. The chapter on industry distribution presents evidence that family firms are less likely to exist in industries where the optimal firm size is larger and more likely to exist in industries with greater amenity potential. Moreover, they are more likely to exist in more mature industries, less likely to exist in industries with more growth opportunities, and less likely to exist in industries with more volatile earnings. The evidence suggests that families choose to set up their companies in industries that require less wealth for control and in industries with less risk, which is consistent with families higher risk aversion compared to atomistic shareholders. The chapter on capital structure choices presents evidence that family firms carry more debt on average than non-family firms. This is consistent with the agency argument that large shareholders are able to better monitor the company and reduce the agency costs of free cash flow; and therefore, increase the capacity for debt financing. There is also evidence that family firms borrow significantly less of highest and lowest priority debt and significantly more of debt with intermediate priorities than non-family firms. This is consistent with higher risk aversion of families compared to atomistic shareholders. Furthermore, family firms carry significantly less short-term debt and significantly more long-term debt. Moreover, they hold significantly less cash and short-term securities while they pay out significantly more of their earnings as dividends. The chapter on performance and survival presents evidence that family firms significantly outperformed non-family firms during the 2.5 years before Sarbanes-Oxley Act of 2002 and this outperformance disappeared during the 1.5 years after the Act. There is also evidence that family firms were less likely to delist from exchanges after the Act irrespective of whether the delisting was via acquisition or via other reasons.